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"Not everything that is faced can be changed, but nothing can be changed until it is faced."-- James Baldwin

Jeff Faux founded the Economic Policy Institute in Washington DC, where he is now Distinguished Fellow. His latest book is The Servant Economy: Where America's Elite is Sending the Middle Class (June 2012. Wiley). He also wrote The Global Class War, and five other books. He has lectured widely in the US and abroad. Among other experiences, he has been a government economist, a finance company manager, a merchant seaman, a bartender and a blueberry farmer.

Interview, Part 4: Romney Will Bring the Far Right to Power at All Levels

The Fiscal Cliff: A Box Office Hit for the Governing Class.

The latest episode of the political melodrama “Fiscal Crisis” has ended, and the next one – the vote on the debt ceiling in two months — is already being promoted. It promises to follow the familiar story line. Fiercely ideological Democrats and Republicans battle over future spending and taxes. The economy is pushed to the brink of collapse. It is rescued at the last minute by a forced compromise that makes neither side happy, setting up the next cliffhanger.

The pundits tell us that this theater of the absurd reflects a dysfunctional democracy; our politicians are incapable of making the “hard” choices needed to return to prosperity.

Not so. In fact, the choices have already been made.
Both Barack Obama and the Republican leadership agree that for the next decade at least, the Federal government will do little or nothing to reverse the slide in living standards for the majority its citizens. Although not deliberately scripted, the theatrics around narrow budget issues blown far out of proportion to their importance allow them to avoid having to deliver the bad news.

For three decades now, they have collaborated in undermining the competitiveness of goods and services produced in America and the bargaining power of those who produce them. As a result, the US economy can no longer support all of the three most politically important American Dreams: Wall Street’s dreams of unlimited subsidized profits; the military-industrial complex’s dream of global domination; and the middle-class dream of perpetually rising living standards.

One out of three? Certainly. Two out of three? Maybe. All three? No way.

Wall Street’s dream is the most secure. The financial crash of 2008-9 showed that a de-regulated financial system had been systematically draining the nations capital from long-term investment in US production to short term global speculation. The crash provided the political opportunity to re-regulate bankers and brokers in order to channel investment into rebuilding America’s productive capacity. The opportunity was lost . Now, neither party has any intention of loosening Wall Street’s grip on America’s future. And both support an even greater expansion of the globalization policies that favor the interests of multinational corporate investors over American workers

The Pentagon and its contractors are a bit more vulnerable. But, despite assertions that “everything” is on the budget-cutting table, Democratic as well as Republican leaders are committed to high levels of military spending to maintain US military supremacy in every important part of the world. After a decade in which the military budget – excluding the costs of our wars — doubled, the appropriations for 2013 was cut slightly. But over the next ten years, the Obama Administration’s proposes a steady expansion of military spending over the next ten years. The Republicans of course are demanding even more. The bi-partisan war on terror requires a permanent and growing capacity to intervene anywhere in the world. There is now a Washington Consensus that the United States must add more missiles, ships and troops to stop China from exerting its influence in places like the South China Sea.

The middle class dream is already on the block. Real incomes for the typical American worker were already stagnant for two decades prior to the crash, and have been falling since. Reversing that trend would require accelerating the demand for US labor, strengthening of the bargaining position of US workers and a substantial sustained investment in our depleted infrastructure and education and training systems.

Despite the bi-partisan rhetoric of “jobs, jobs, jobs” there is no plan for any of this. With consumers not spending, business not investing and a large chronic trade deficit, the common sense path to a rejuvenated labor market is more government investment in programs and projects that will create good jobs and make us more competitive in the future. The fact that interest rates are at rock bottom makes this the ideal time for government to borrow and invest. But this is not to be. In fact, the president and Congressional Republicans’ ten year budgets call for a reduction in non-military discretionary spending – the source of virtually all domestic public investment — of 45 and 52 percent, respectively.

As for strengthening the bargain position of workers, forget about it. Once again, the battered US labor movement worked its heart out for the Democratic cause, and once again, legislation to help even up the playing field between corporate employers and their employees will be absent from the Democratic Party’s congressional agenda. With the decades long budget squeeze at all levels of government, liberals and labor will be hard put just to keep workplace protections, social security, health programs and other parts of the social wage from falling further.

The actual economic policy of the US government – by design or default -is to make labor so cheap that business will decide to invest again. Even under the best of assumptions, we have a long way to go. At current growth rates – assuming that there is no new downturn or bank crisis, Europe recovers and China continues to finance or trade deficit – it will take more than ten more years to get back to the pre-recession (2007) unemployment levels. Those numbers represent millions of Americans who will be chronically unemployed, burdened with school debt they cannot pay off with low-wage, dead-end jobs and whose dream of retirement becomes a nightmare of having to work until they die.

President Obama, the Republican leaders and the people who advise them are not stupid. They understand where the economy’s trajectory is taking the middle class. But changing that path requires them to challenge the basic interests of the rich and powerful. That is too heavy a political lift.

But who among them wants to admit — even perhaps to themselves — that they have colluded to preside over another decade of the grinding away of the American dream? So even if they haven’t consciously planned it, the periodic, self-perpetuating budget showdown is a godsend for our governing elites. It allows them to shift the public debate from the question of what should be our national priorities to the question of, given those priorities, how should to pain to the middle class be allocated. The president wants the rich to share some of the burden. The Republicans wants to spare them any discomfort at all.

Each iteration of the white-knuckle budget stare down gives us an engrossing tension-filled drama of powerful stubborn men (mostly) locked in bitter conflict under a clock ticking toward an impending doom. But how long can this show run? There’s a limit to the number of versions of Lincoln even Stephen Spielberg could make exciting. Eventually, the plot gets old, the actors go stale and the dreaming audience wakes up to the real world.

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• Provocative and brutally honest, this book takes up where almost all current books on the economic and political crisis leave off, looking not simply at how we got here, but where we are going.

Americans are in denial...Our much-touted service economy will become a "servant" economy. Debt-laden 20-someting college graduates will become 30- and 40- somethings, still juggling dead-end jobs. Pesonal dignity will go the way of decent pay....
The core problem, argues Faux, is not that we don't know what to do...
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